Report: Downtown Providence office vacancy increases to 12.2%

THE DOWNTOWN PROVIDENCE office vacancy rate at the end of 2019 was 12.2%./ PBN FILE PHOTO/CHRIS BERGENHEIM
THE DOWNTOWN PROVIDENCE office vacancy rate at the end of 2019 was 12.2%./ PBN FILE PHOTO/CHRIS BERGENHEIM

PROVIDENCE – The Downtown vacancy rate of office space increased roughly 2.4 percentage points year over year to 12.2% in the 2019 fourth quarter, CBRE Inc. said on Tuesday.

Net absorption declined 61,052 square feet in the quarter, while occupancy of the Downtown area was 5.6 million square feet.

The increase in vacancy was largely attributable to Class A office space in the area, with net absorption in the Class A m Market declining 44,551 square feet. Vacancy rates of Class A were 14.1%. CBRE said that the introduction of 225 Dyer St.  and space in the Providence Place mall helped increase Class A inventory by 247,561 square feet in the Downtown area.

The average Class A lease rate was $34.41 per square foot, a 5.24% increase year over year. The report attributed this rise to the increase in the quality of offerings.

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Class B office space in the Downtown area had a vacancy rate of 11.8% in the quarter with net absorption of 29,126 square feet. Class B leased for an average of $23.04 per square foot in the quarter.

The Class C vacancy rate in the Downtown area was 12.2% in the quarter. Net absorption was 12,645 square feet. Average lease rates for Class C offices was $20.84 per square foot.

Top three Downtown submarkets (by total square footage) vacancy rates and average lease rates:

  • Financial: Vacancy rate of 14.5%. Average rent rate of $27.06 per square foot.
  • Promenade: Vacancy rate of 11.8%, Average lease rate of $32.67 per square foot.
  • Jewelry (Richmond): Vacancy rate of $13.1%. Average lease rate of $32.67 per square foot.

The Rhode Island suburban office market had an overall vacancy rate of 12.56% in the fourth quarter, a decline from 12.67% one year prior. Net absorption in the suburb market declined 19,771.

The three largest suburban markets’ vacancy rates and lease rates:

  • West Bay: Vacancy rate of 16% with an average lease rate of $19.36 per square foot.
  • Northern Rhode Island: Vacancy rate of 11.5% with an average lease rate of $18.52 per square foot.
  • East Bay: Vacancy rate of 12% and an average lease rate of $16.95 per square foot.

The Rhode Island industrial market had a vacancy rate of 1.7% in the quarter, a 0.1 percentage point decline year over year. Net absorption declined 249,304 square feet over the year. The negative absorption rate was attributed primarily to three new spaces coming online, adding 244,636 of negative absorption.

Industrial submarkets in the fourth quarter:

  • North: Vacancy rate of 1.3%, net absorption declined 223,362 year over year.
  • West Bay: Vacancy rate of 0.9%, net absorption of 205,966 year over year.
  • East Bay: Vacancy rate of 5.7%, net absorption declined 217,492 year over year.
  • South: Vacancy rate of 2.9%, net absorption declined 14,416 year over year.

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